Medicare provides federal health insurance for 43 million people who are aged or disabled or who have end-stage renal disease. Most receive services through the traditional fee-for-service (FFS) part of the program, which pays providers a set fee for each covered service (or bundle of services). Participants can choose their providers and are not required to obtain prior authorization for any covered service.
Medicare beneficiaries have the option of enrolling in Medicare Advantage–the program through which private plans participate in Medicare–rather than receiving their care through the FFS program.1 They may choose to do so because such plans provide additional benefits beyond those available within traditional Medicare, including coverage for services not covered by FFS Medi- care (for instance, dental services) and cash rebates of premiums or reduced cost-sharing. As of June 2007, about 18 percent of beneficiaries are enrolled in Medicare Advantage plans.2 This brief describes how those private plans function, how they are paid, how their costs com- pare with the costs of traditional Medicare, and how those costs vary by geographic area.
See also: Testimony on the Medicare Advantage Program